Tuesday 21 August 2018

Difference between Stock Trading and Forex Trading

Traders are always faced with the question, stocks or currencies, which market is better? While the stock market and the foreign exchange market are two completely different entities, they are both lucrative, and just as risky. Starting off trading, beginners will find it confusing to pick between stocks and currencies, and these perplexed traders fuelled by internet myths will take a big fall ultimately! Shares and currencies are no rocket-science theories that need sleepless nights of studying; with enough research, any trade can be bettered at.
 
Here are the major differences between stocks and trades:
 
Stock Trading vs Forex Trading
Stock Trading vs Forex Trading
 
1) Trading Spots: Equities are traded at stock exchange markets. These places exist solely to facilitate trades since they're a long and arduous process which needs clear and accurate data. One predominant example is the NYSE (New York Stock Exchange); trading at exchanges has an amazing advantage - traders can keep a track of buys/sells using order books. Currencies, on the other hand, are traded over the counter. Forex is a private deal between the buyer and the seller. These transactions are accompanied by several risks like broker fraud, counterparty default etc.
 
2) Entry Fees: This factor plays a huge role in luring in traders into the Forex trading market. Stock trading needs a huge investment capital. This makes Forex the better choice for several traders. However, the foreign exchange market is a leveraged ecosystem. This can be a boon or a bane, depending on how good the trader is! With leverage, you can invest much more than just your trading capital value. However, this also increases risks; when a leveraged trade is lost, investment capital and the leveraged amount, both are incurred by the trader!
 
3) Lesser Spread Costs: The spreads are lesser in Forex when compared to stocks! Trending currencies like USD, EUR, JPY, GBP etc., have tight spreads. However, when you're considering long-run investments, Forex won't charge as much as equities. Stock trading, on the other hand, is a pricey process. Similar to currencies, premium stocks often have higher spreads.
 
4) Varying Mechanisms: Forex is primarily meant for speculation, and stocks are meant to be invested in. Speculating in currency markets is cheaper when compared to the share market. Traders can speculate stocks, but the capital needed for it is huge, making the entire process very risky. Predominantly, the stock market serves as investments.
 
Stocks and Forex, both offer immense profits when traded smartly. At the same time, the risks are immense. Forex trading relies on leverages, meaning losing is not an option! It doesn't have to be, with the world's best Forex broker by your side; you can win all your trades! Call WesternFX. With the assistance of our stellar brokers, you will see trading success in no time.